Abstract
Overview
Introduction
Global and regional emissions trading markets are emerging and drive strategic
energy policy. The EU-ETS is a leading player and dominated carbon trading in
2006, it is pivotal to achieving a truly ' global' carbon trading scheme and
meeting the wider environmental challenge. The Clean Development Mechanism is
key to engaging non-EU participants such as China who dominate the CDM market.
Scope
- Analyzing regional carbon markets and the interaction with global carbon
programmes - comparing the EU ETS with alternative emissions reducing schemes
- Measuring the success of establishing mechanisms sell carbon permits
world-wide and quantifying where the major trade is occurring
- Insight into the constraints faced by the major players reaching their
carbon targets set out by the Kyoto protocol, in particular Phase 2 of EU ETS
- An assessment of carbon market fundamentals - supply, demand and
subsequently the carbon emissions schemes that attract investors
Report Highlights
Standardized exchange trade accounted for almost a quarter of the European
carbon market. The European Carbon Exchange (ECX) accounted for around three
quarters of all formalized emissions trading last year. Europe' s leading power
exchanges have used synergies with the carbon market to capture significant
ETS volume
171 states signed the Kyoto Protocol by June 2007. Under the Kyoto Protocol,
all Annex II countries have established emission quotas, in ratifying the
protocol, essentially agreeing to bear the costs of emission reductions. With
the EU viewed collectively as a single economy, it accounts for 27 of the 33
Annex II countries to ratify Kyoto
China dominates selling into the CDM - China' s rapidly growing, increasingly
carbon-intensive economy offers the greatest scope for cost-effective
Certified Emissions Reductions. Governments often invest in CERs to help meet
their overall Kyoto targets, while private investors may look to hedge their
exposure in regional markets like the EU ETS
Reasons to Purchase
- Establish the current level of trading in carbon and assess the drivers
for global carbon trading and alternative abatement mechanisms
- Understand non-EU participation in the global carbon market arena and
assess the key players
- Examine how the EU and trading in CDMs will shape the future of carbon
trading achieving the objectives et out in the Kyoto protocol
Table of Contents
- DATAMONITOR VIEW
- ANALYSIS
- The Kyoto Protocol envisaged global carbon emissions trading
- The EU is pivotal to establishing a truly ' global' carbon market
- Europe' s ETS dominated global carbon trading in 2006
- The majority of European carbon is traded over-the-counter
- ECX leads the standardized market for EU emissions trading
- EU member states are the key Kyoto Protocol signatories
- Brussels is pinning its hopes on a ' cap and trade' carbon market
- Key EU economies will ultimately determine the success of the ETS
- The undesirable surplus of EU allowances remained in 2006
- The UK has escaped an EC clampdown on Phase II allocations
- Natural sellers will have their ETS allocations slashed from 2008
- The EU is collectively off-target to meet its ETS commitments
- ETS Phase II will bring a dramatic shift in market fundamentals
- Carbon prices reflect the need for a notable curb in emissions
- The CDM is key to engaging non-EU carbon market participants
- China dominates selling into the CDM
- Over two thirds of CDM credits are assimilated into the EU ETS
- Former Soviet states profit from renewable energy investments
- Former EU15 governments are the most active JI participants
- Investors place differing emphases on project-based mechanisms
- Voluntary schemes are the fastest growing Kyoto mechanism
- US industry is preparing for inevitable federal action on carbon
- Beijing bourse would cement the EU' s appetite for Chinese carbon
- APPENDIX
- Definitions
- Ask the analyst
- Datamonitor consulting
- Disclaimer
- List of Figures
- Figure 1: The EU is pivotal to establishing a truly ' global' carbon
market
- Figure 2: Europe' s ETS dominated global carbon trading in 2006
- Figure 3: Non-brokered bilateral trading accounts for just a fifth of
European carbon market activity
- Figure 4: The Anglo-Dutch ECX dominates formalized EU emissions trading
- Figure 5: Key EU economies will ultimately determine the success of
the ETS
- Figure 6: The undesirable surplus of EU allowances remained in 2006
- Figure 7: Both the UK and Slovakia secured European Commission (EC)
approval for a larger emissions quota in their Phase II NAPs
- Figure 8: Poland and its smaller central and eastern European
neighbors have been disproportionately targeted by Brussels in Phase II
- Figure 9: The EU is collectively off-target to meet its ETS commitments
- Figure 10: The transition from Phase I to Phase II allocations will
see the current surplus of credits replaced with an EUA shortfall from 2008
- Figure 11: Trader focus is shifting from an increasingly meaningless
ETS Phase I towards increasingly stringent Phase II allocations
- Figure 12: While Europe' s carbon market now dwarfs the CDM as Kyoto' s
most traded and valuable mechanism, project-based trade remains pivotal
- Figure 13: China generated 70% of all CDM CERs in 2006
- Figure 14: The UK was the largest purchaser of CERs in 2006,
reflecting its large ETS Phase I deficit
- Figure 15: Central and eastern European states are cashing in on a
' greener' economic recovery
- Figure 16: Copenhagen and Vienna are buying ERUs to bolster their 2012
Kyoto compliance efforts
- Figure 17: Private investors have greater interest in CDM credits,
which can be used in Phase I
- Figure 18: Governments take a longer-term view, dominating trade in JI
credits post-2008
- Figure 19: While nominal and relative growth of the EU ETS is
impressive, voluntary Kyoto schemes are growing at over 300% per annum
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